In the context of environmental pollution, climate change, and resource depletion, the circular economy is increasingly recognized as an economic model that effectively addresses those urgent issues. While there are many definitions of the circular economy, the core principles remain consistent: i) it is an economic model, not just a technical approach; ii) Everything is considered as input for something else; iii) it is closely linked to attitudes and practices concerning waste; iv) it encompasses the design, production, and consumption of products; it applies across all industries and sectors.

Viet Nam has committed to achieving net-zero emission by 2050, underscoring determination to advance circular economy. On the path to reaching this goal Vietnam has received support from various international organizations, including UNDP. In the  agriculture sector, UNDP has partnered with the International Water Management Institute (IWMI) to initiate a joint effort with three key activities: i) develop a circular economy section for the CE Hub website; ii) building capacity and disseminating circular economy models at selected locations; iii) upgrading  circular business models for chosen value chains

The Science Institute for Rural Development (SIRD) was recruited to carry out the remaining Activity 2 and 3. The circular economy training is part of Activity 2. This Activity is being implemented in Son La with coffee value chains and in the Mekong Delta with rice value chains.

Many initiatives are aimed at advancing the rice and coffee value chains, including enhancing circular economy capacity through various training programs. These efforts are part of Work Package 4 of the UNDP and IWMI project “Recycling with Circular Economy Approaches for Rural Waste Management”. For the coffee sector, the project organized a ToF training course for 80 actors in Son La coffee value chains from May 23-25, 2024. The training took place in a major coffee growing commune to ensure accessibility for participants from mountainous communities. Information collected during the training has identified  several issues that require attention based on a bottom-up approach.

(1) Knowledge of circular economy among stakeholders in coffee value chains

In reality, the central government, local authorities, businesses, farmer organizations, coffee programs and projects have contributed to training in coffee growing regions, their efforts fall short relative to      the demand. These contributions primarily focus on production techniques rather than training on circular economy in coffee production. A survey in Mai Son district, Son La province revealed that over the past five years, no local residents have received training or visited any circular economy models. Although some residents have certain basic knowledge of the concept or have encountered it via      social media and network there is still a significant lack of understanding ,there is still a significant lack of understandings. As a result, both the local and officials often have misconceptions when discussing the circular economy.

The government and local authority are highly interested in programs on sustainable coffee development, including EUDR, and high-tech applications. Training farmers is an crucial activity.      However, both central and local governments have yet to establish policies or allocate fund specifically for training on circular economy for stakeholders in coffee value chains.

Given the limited knowledge of circular economy among those directly involved in coffee value chains and the absence of specific policies, it is essential to first establish concrete policies for training. This training should be targeted and relevant, conducted through ToT and ToF courses. The approach should prioritize a ToFs “farmers training farmers”, supported by the government and external organizations.

(2) Return nutrient to soil and improve coffee growing land

One of the objectives of implementing a circular economy in coffee production is to return nutrients from coffee waste back to the fields. To achieve this, prioritizing the use of organic fertilizer made from coffee husks and wastewater in coffee plantations is essential. This approach not only reduce the reliance on chemical fertilize but also represents a direct circular model that improves soil health by returning resources to the soil, enhancing soil structure, and minimizing the need to transport waste long distances from its source. However, this effort faces several challenges, including:

• In Son La, all coffee is processed using wet processing technology, which is advanced and helps maintain higher coffee quality compared to dry processing. However, managing wastewater from the soaking and fermenting stages of fresh coffee is a significant challenge. Producing one ton of Arabica coffee requires approximately 85,000 liters of clean water, making wastewater a major environmental issue in the region. Both modern and small processing facilities face this problem. To address it, Son La Province has implemented several measures, including planning centralized coffee processing zones and gradually phasing out small, scattered processing facilities. Additionally, there have been suggestions to switch to dry processing. Despite these efforts, a resolution that balances quality, cost, and environmental impact has yet to be achieved.
• Most fresh coffee beans are processed by small, informal facilities, many of which lack knowledge about using biological products for wastewater treatment. These facilities often add these products only to anaerobic tanks, the final stage of wastewater treatment, which fails to address the foul odor effectively. Furthermore, there has been no guidance on introducing biological products immediately as wastewater exits the milling machine -a simple technical step with a significant impact that has yet to receive attention.
• The infrastructure and technical equipment used for environmental management and monitoring circular economy practices in small processing units are outdated and fall short compared to those in larger enterprises. Coffee beans are primarily dried on open ground and only during favorable weather conditions. As a result, the moisture content of the beans often fails to meet quality standards, and preprocessing factors are inadequate, leading to reduced coffee quality and challenges with long-term storage.
• Information systems, record-keeping, and data management related to cultivation and processing are inadequate for effectively  monitoring and evaluating the goals of the circular economy in coffee.
• To manage coffee waste according to circular economy principles, mechanization support is needed, however, several issues persist: farmers lack machinery and therefore mostly compost manually, which is labor intensive, and inconsistent; there are no means to transport husks to composting sites or to transport compost to fields; there are no tankers available for transporting wastewater to the fields, leading to either dumping or uncontrolled runoff into the environment.

(4) Area for managing coffee waste in line with circular economy

Managing coffee waste effectively requires production areas that meet specific standards. The coffee region faces many difficult barriers that needs to be addressed:

• Coffee wastewater treatment, based on biological principles, requires at least two tanks: an anaerobic tank and an aerobic tank. These tanks must be adequately sized to handle the wastewater generated from coffee milling. The anaerobic tank needs to store wastewater for at least two months before it can be transferred to the aerobic tank. Processing households face several challenges, including insufficient land, construction violations on agricultural land, lack of registration with regulatory authorities, and underreporting of actual processing volumes. Due to the limited capacity to manage large volumes of wastewater, these processing facilities often end up discharging untreated wastewater into the environment. 
• Due to space constraints, processing facilities and households face significant difficulties in composting organic fertilizer. Some have managed to rent or borrow land within their villages, but the available area remains very limited. Others are considering moving coffee husks directly to the fields for composting. However, implementing this plan would require either cutting down some coffee plants or encroaching on forest land. Without strict management, such actions could lead to violations of agricultural land use regulations. 
• Some villages in Mai Son have public land available and are willing to lend or lease it to village cooperatives at preferential rates for practicing circular economy. However, this approach has proven impractical. These cooperatives were established based on leadership directives rather than actual business needs. As a result, they lack capital, do not have offices, lack management skills, and have no viable business plans.

(5) Mismanagement practices

• Farmers are not yet proficient in technical processes and methods for composting and wastewater treatment, and there are few demonstration models available for them to reference. The only models available are small-scale and local, so when difficulties arise, there is no source of guidance or support.
• The handling of coffee husks remains largely small-scale. Most operations lack experience or the capability to apply circular economy principles, and production facilities are small-scale.
• Most coffee production and business facilities -whether enterprises, cooperatives, or households-focus on short-term profit goals when deciding to produce, process, or trade coffee. They pay little attention to long-term benefits, recycling, and environmental welfare.
• Environmentally friendly practices among coffee producers and consumers are not yet widespread. Most households do not compost organic fertilizer from coffee husks. Many engage in agricultural practices that harm coffee plants and soil, such as dumping untreated coffee husks onto fields, which leads to soil acidification and reduced root development. Additionally, most households either do not use organic fertilizer from coffee husks or use it infrequently, preferring chemical fertilizers and pesticides to achieve high productivity in a short time.
• mplementing organic coffee production according to a circular economy approach requires the use of organic fertilizer, clean irrigation water, and manual methods. This approach demands significant labor, making it challenging to scale up over large areas, especially under conditions of water scarcity and low soil moisture during fertilization.
• Lack of field trips to study models and insufficient practical knowledge.
• Insufficient funding to purchase materials, microbial agents, manure, land, machinery, equipment for wastewater extraction, technical equipment, and even coffee husks.
• Limited awareness of circular economy products.

(6) Policy and enforcement

Vietnam has formulated a number of legal documents, decrees, and circulars that provide an initial legal framework for the circular economy. However, there is still a lack of specific policies for practical implementation. Some of the challenges include:

• There is currently no established process for collecting, preserving, and processing coffee waste at the household, farm, or individual level. Guidelines for implementing a circular economy model for coffee at the local level have not been developed. Additionally, there are no regulations or standards for the production, commercialization, and utilization of coffee waste in Son La.
• There is a lack of legal frameworks to motivate and regulate the behavior of stakeholders involved in coffee cultivation, processing, and business towards producing and consuming environmentally friendly products. As a result, the concept of a circular economy remains underdeveloped.
• Coffee production businesses need to invest in infrastructure such as wastewater treatment tanks, pipelines, drying yards for coffee beans, and storage warehouses. However, Son La province currently lacks policies to support households in adopting circular economy models through subsidized loans. As a result, producers, particularly those involved in processing, typically rely on their own funds or private loans.
• There is a lack of policies to support technology and market access, which hinders efforts to encourage collaboration between businesses and farmers within the value chain.
• There is no widespread communication about clean production models, zero-emission technologies, and circular economy practices in coffee for relevant stakeholders.
• There is no mandatory mechanism for sustainable coffee cultivation, including practices such as intercropping, biodiversity protection, or the use of organic fertilizers and bio-pesticides. Most farmers practice monoculture, engage in unsustainable practices, and experience soil degradation, which leads to smaller fruit sizes (with size 16 making up 80% and size 18 only 20%). Consequently, the coffee yield in Son La is low (12 tons per hectare), resulting in reduced coffee quality and lower prices.
• There is a lack of policies or incentives to encourage and support farmers and cooperatives in transitioning from a linear economy model to a circular economy model for coffee.

(7) Production and business management

• Organizations involved in coffee production and business: Son La currently has 9 industrial-scale coffee processing facilities, but in reality, there are mainly 4 large coffee processing companies (Minh Tien, Cat Que, Phuc Sinh, and Son La Coffee), nearly 200 small-scale collection and processing facilities, cooperatives, and individual farmers. Districts and communes are generally aware of the companies, cooperatives, and individual farmers in their area. The biggest issue is managing the small processing facilities, which were established spontaneously based on family decisions. As a result, local authorities at the district and commune levels lack complete oversight. Some facilities are operational but not listed in the review list, while others are unsure about the source information in the list.
• Production and Consumption Linkage: There have been some linkages between businesses and farmers through training, provision of materials, and free trials of organic fertilizer made from coffee waste, but these efforts have been on a small scale. Each business typically engages with only a few cooperatives or villages. For example, Minh Tien collaborates with four cooperatives in Son La and Mai Son, while Cat Que partners with collection and processing facilities in Mai Son and Thuan Chau. These linkages are often limited to specific stages or periods and are not formalized with economic contracts but rather with agreements or memorandums of understanding. Due to the lack of strong, long-term links, if one company fails to fulfill its commitments, farmers may switch to another company.
• Market Prices and Farmer Vulnerability: Market prices fluctuate daily, leaving farmers in a passive position and creating an unstable market with low and uncertain profitability. Collectors typically notify farmers of prices for the next day; however, actual prices often differ from these notifications, significantly impacting the market. When supply is low, collectors usually increase prices, which benefits farmers but causes difficulties for processing facilities due to higher costs and insufficient raw materials. Conversely, during a high harvest, prices are generally reduced, leading to a situation where farmers suffer losses from “good seasons with bad prices,” affecting all farmers equally. Farmers are always at a disadvantage; even if they know they are being underpaid, they have no choice but to sell. Businesses, agents, and processing facilities attribute price reductions to coffee quality and non-compliance with procedures by farmers. In contrast, farmers and local officials argue that price manipulation by companies is the real cause. There are claims that Minh Tien Company’s debt to farmers led them to sell their coffee elsewhere and that other companies colluded to drive prices down, exploiting farmers. Such information is not openly discussed, making it difficult to verify. Nonetheless, evidence suggests that to avoid being underpaid, farmers are investing in self-processing or collaborating to process coffee themselves, which negatively impacts the environment.  
• The market for environmental goods and services, eco-friendly products, and recycled items (such as coffee husks and organic fertilizer) is still underdeveloped, with limited attention and support for these products. Innovative offerings, such as coffee from the AraTay Cooperative of Thai women in Mai Son, coffee products applying circular economy principles, nutrient water from coffee wastewater by Mr. Hai in Thuan Chau, and vermin culture using coffee husks by the Son La Agricultural Cooperative in Mai Son, have yet to gain significant recognition or market penetration.
• Collaboration between government authorities and private entities in promoting the adoption of environmental protection solutions within the circular economy for coffee remains very limited. For instance, the Ecomic product, which effectively treats wastewater from coffee processing and was evaluated and tested by Hanvet Pharmaceutical, is being independently developed in the market by the company. Regulatory agencies have not yet established mechanisms to support or assist businesses in promoting scientific research results or in connecting them with local coffee wastewater treatment models.
• Business management capability of households, processing facilities, and cooperatives 
  • Coffee-growing households in Son La generally face the following situation: they operate small-scale farms of about 2 hectares, primarily relying on family labor. These households typically lack business plans and economic accounts and do not maintain field records. They do not compare the use of organic fertilizer with chemical fertilizer, depend on local collection and processing, and follow prevailing practices without innovation. Their livelihoods are highly dependent on coffee, with little to no plans for additional income sources. Few farmers are trained in coffee production techniques, and there is almost no training in household economic management.
  • Processing facilities vary widely in scale, handling anywhere from 3 to 3,000 tons of coffee annually. Most facility owners operate their own coffee farms, so their processing materials primarily come from their farms or nearby areas, with a few sourcing from other districts. Each year, these facilities estimate the volume of coffee they will purchase and process based on their machinery and workshop capacities. They maintain simple records related to purchases and payments. While some facilities have invested in electronic scales, computers, and printers, they often lack clear business plans. Small facilities are usually run by local farmers who are open to cooperating with the government and participating in surveys and research. However, they often lack the drive to expand their operations. In contrast, larger facilities, typically not operated by local farmers, have stronger financial resources. These larger operations often act as agents for companies and are referred to locally as “tycoons” This group frequently collaborates on pricing strategies to pressure smaller farmers and is generally reluctant to share information or cooperate with the government or research surveys. They are particularly wary of environmental officers. Although environmental agencies occasionally conduct training on environmental issues for coffee processing facilities, there is little focus on household management, waste utilization for increased income, or circular economy practices.
  • Cooperatives in coffee-growing regions are generally small in scale, with most being newly established under the 2013 Cooperative Law. However, some cooperatives in the province have developed well, such as the Bich Thao Coffee Cooperative and the AraTay Coffee Cooperative. Established in 2017, Bich Thao Cooperative has successfully invested in itself, manages its operations effectively, grows and processes its own coffee, and has built a recognized brand. AraTay Cooperative, founded in 2020 and primarily run by ethnic minority women, also has a branded product but operates on a very small scale and relies heavily on foreign projects, which makes it difficult to replicate. In Mai Son district, the District Committee initiated a policy two years ago to promote the establishment of village-based cooperatives. As a result, the district now has nearly 50 such cooperatives (with one or two in each coffee-growing commune). However, the majority of these cooperatives are small, economically weak, and face numerous operational challenges. Some have lost confidence in the policy. Common issues include a lack of headquarters, registered capital existing only on paper, minimal actual contributed capital, no business plans, and no accounting records due to limited activity.
  • In Son La, there are very few units specializing in circular economy businesses. Currently, only one small household business is known for trading organic fertilizer made from coffee husks and wastewater. Additionally, one cooperative produces organic fertilizer and raises earthworms using coffee husks. These are the only two operational units identified so far. There is also one cooperative planning a significant investment to produce organic fertilizer from coffee husks, but it has not yet commenced operations due to land and site clearance issues.